Securing Retailer Support

To gain retailers’ support, suppliers must demonstrate why their product deserves a place in their stores. Does it perform better than competing brands in term of return on inventory (earns × turns)?

For example consider a brand that is seeking distribution at a major supermarket chain. The brand is currently distributed in a few small supermarket chains; its value share in the supermarket channel is 2.5%, and its weighted distribution in the channel is 20%.

What facts should the trade marketer put forward that might help her secure the category manager’s support to list the brand? Why should the retailer be interested in stocking the brand?

Based on the data, the brand has a 12.5% (=2.5/20%) share in handlers, i.e., its value share in those stores that are carrying the brand is 12.5%. That is quite a respectable share — depending on the level of fragmentation within the category, it possibly ranks among the top one or two in the category, where distributed.

Because it is conceptually meaningful, share in handlers is an apt measure to demonstrate the brand’s potential, where the strength of the brand lies in its value share. Similarly measures such as SPPD, rate of sales or rate of gross profits, which also allow for a comparison with competing brands, are also appropriate for justifying the distribution of a product. Rate of gross profits would work best for brands that command higher margins for the retailer.

Other than measures that reflect the size of the brand, the synergy between the brand’s image and the chain’s role and positioning, is an important criteria. An upmarket retailer, for instance, would not consider listing a low end brand, irrespective of how big it might be where it sells.

Considering the perpetual parade of new products, it is usually challenging to secure retailer support for new, unheard of products or less established brands. In such instances, in addition to bearing the listing fees, manufacturers also use a variety of discounts to incentivize retailers to stock new products.

Importantly, a partnership built on trust greatly facilitates the alliance between trade partners. If relationships are not well developed, or if their resources are constrained, manufacturers may need to rely on distributors to market their products to retailers.

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